China has issued a stimulus package for the auto sector – including a purchase tax cut and a scrappage incentive – as part of a series of measures to boost key industries in the midst of the global economic downturn and financial crisis.


The package from the State Council includes a cut in the sales tax to 5% from 10% for cars with engines smaller than 1.6 litres.


The China Daily said the tax cut would be in place until the end of the year.


“To speed up the consolidation and revival of the auto industry, China must implement an active policy to boost consumption,” the council said in a statement published on the central government’s website.


The government will also give one-off cash rebates totalling US$732m to owners of older vehicles who trade them in for newer, more fuel-efficient ones. Details of the pending scheme were unavailable.

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The government said it will also set up a US$1.4bn fund to promote new technology, including renewable energy, over the next three years, while supporting the eventual mass production of electric vehicles.


In addition to the short-term measures, the council said it aimed to enhance China’s global competitiveness by encouraging brand development and establishing export-orientated production bases for vehicles and parts.